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HMRC internal manual

Offshore Funds Manual

Introduction: overview of the 2009 regime for offshore funds: overview of the regime for funds

Reporting funds

An offshore entity that meets the definition of an offshore fund (under S355 TIOPA 2010 - see OFM03000 onwards) can, on meeting certain conditions, apply to be a ‘reporting fund’. The relevance of reporting fund status for UK investors is that gains realised on disposals of investments in reporting funds will in most circumstances be subject to tax on chargeable gains (see the detailed guidance on reporting funds at OFM20000 onwards for exceptions), whereas gains realised on disposals of investments in non-reporting funds will be subject to less favourable treatment as they will be charged to tax on income.

Reporting funds must prepare accounts in accordance with an acceptable accounting policy, and provide reports of their ‘reportable income’, which is the accounts figure for the total return of the fund adjusted in accordance with certain rules set out in the Offshore Funds (Tax) Regulations 2009. They must provide reports to both HMRC, to include a computation showing their reportable income, and to participants (investors) that show their proportionate share of that income. In addition, reporting funds must make certain information available to HMRC when requested to do so.

Funds may apply for reporting fund status in advance or in arrears, subject to certain time limits - see OFM21400 for details. A fund, once granted reporting fund status, may rely on that status going forward subject to continued compliance with the reporting funds rules, which include making reports as described above for each period of account. A fund may exit the reporting funds regime on giving notice (see OFM31000) and there are rules that permit HMRC to exclude a fund from the regime for serious breaches or a number of minor breaches, subject to an appeals process (see OFM29320).

See OFM02300 for an overview of the treatment of UK investors in reporting funds.

There is a list of funds that come within the definition of an offshore fund and have successfully applied for reporting fund status on HMRC’s website. The list (PDF 21KB) is updated on a monthly basis.

Non-reporting funds

A non-reporting fund is any offshore entity that falls within the definition of an offshore fund but has not obtained reporting fund status (or has left or been excluded from the reporting fund regime) - that is to say, an offshore fund to which Part 3 of the Offshore Fund (Tax) Regulations 2009, which deals with reporting funds, does not apply.

Non-reporting funds are under no obligations to provide information to HMRC but it is likely that such a fund will be obliged by local law or by its constitution to provide information to investors in respect of income arising to the fund. Although it is expected that they would provide details of distributions as a matter of routine to UK investors, it is the responsibility of investors to otherwise obtain and record such information.

See OFM02300 for an overview of the treatment of UK investors in non-reporting funds.